French President Emmanuel Macron suffered a major setback after he lost control of the National Assembly in legislative elections on Sunday. His defeat threatens the country’s political stability.

Initial projections by pollsters Ifop, OpinionWay, Elabe and Ipsos showed Macron's Ensemble alliance winning 230-250 seats, the left-wing Nupes alliance securing 141-175 and Les Republicains 60-75.

Finance Minister Bruno Le Maire called the outcome a "democratic shock" and added that if other blocs did not cooperate, "this would block our capacity to reform and protect the French."

Meanwhile, Prime Minister Elisabeth Borne said, “the result is a risk for our country in view of the challenges we have to face," adding that from Monday on, Macron's camp will work to seek alliances.

Market reaction

Amid looming recession fears, the French election disappointment also keeps the euro under check. At the time of writing, EUR/USD is trading around 1.0500, almost unchanged on the day.